Maybe the fourth or fifth time’s a charm? After rising through mid-summer, gas prices were forecast to fall in August. But the decrease basically never came. Next, predictions called for a drop in gas prices by late September. Likewise, those expectations were never met. No matter if Mother Nature, refinery problems, or mysterious market forces are to blame for gas prices failing to decrease as anticipated, the net result for drivers is frustration—as well as skepticism about the next prediction about falling gas prices.
That next prediction is being made right now, as it happens. Analysts are calling for gas prices to drop as much as 10¢ per gallon over the next week, and perhaps fall by 45¢ per gallon in some states by the end of the year.
This week’s Energy Information Agency report listed the national average for a gallon of regular at $3.82. That’s cheaper than last week ($3.85), and cheaper than the all-time highs for mid-September reached a few weeks back ($3.88). But it’s but remarkably high for this time of year. One year ago, when prices were far from inexpensive compared to previous autumns, the average was 34¢ per gallon cheaper that it is lately.
According to the AAA Fuel Gauge Report, the country’s cheapest gas prices are in the South, and even there drivers are typically paying $3.50 and up per gallon. Forgive us for jinxing things, but a reversal in gas prices appears to be underway. In Michigan, reports the Detroit Free Press, average gas prices are at $3.77, down 14¢ in a single week. Analysts say that prices in Michigan will continue to drop, perhaps reaching as low as $3.30 by year’s end.
At GasBuddy, Patrick DeHaan is forecasting the national average to dip by 5¢ to 12¢ per gallon over the next week, and for especially large declines to take place in the Upper Midwest:
In fact, some areas of the Great Lakes could see prices fall to the low-to-mid $3/gal range over the next week, which would be their lowest prices since June.
DeHaan also notes that after gas prices in California soared to record highs recently with shocking speed—rising roughly 50¢ over a mere seven days—prices at stations have since retreated only 7¢ per gallon over last week, despite actions by the state government and substantially lower wholesale prices.
Of all the frustrations felt by drivers over gas prices, perhaps the most maddening is the all-too-common situation described above, in which retail prices skyrocket in a matter of days—but tend to fall extremely slowly. A Los Angeles Times article offers an explanation (or at least an attempt at an explanation) of such “price asymmetry” or “downward sticky” pricing, as experts call it, with an “an old industry adage” that has it that “gasoline prices shoot up like a rocket but drift down like a feather.”
Prices shoot up like a rocket when stations face dramatically higher fuel costs from suppliers, either due to rising demand or falling supply. The feather part of the occasion occurs largely because station owners must keep prices high in order to sell off the expensive fuel they recently purchased, and also because drivers who have quickly grown accustomed to high prices will be grateful for even a small price decline at the pump:
In addition, as prices fall after a sudden surge, service station operators try to capture profits lost on the way up when they couldn’t hike prices fast enough, analysts said.
In other words, stations keep prices high simply because they can. Drivers will pay these high prices—because they have to, and also because they’re happy they’re not paying the even higher prices charged recently.